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A series of favorable macroeconomic data in recent days has led Goldman Sachs to reduce its view on the probability of a recession risk in the United States for next year from 25% to 20%.
In a research note on Saturday, the investment bank cited further cuts to the 12-month rate likelihood, subject to more good news before the Fed's next FOMC meeting in September.
On August 2, Goldman Sachs raised its recession indicator from 15% to 25%. “We have now lowered it back to 20% because data released since August 2, including retail sales and jobless claims this week, show no signs of a recession,” the team wrote.
On Thursday, the U.S. Census Bureau said July retail sales rose 1.0%, above the 0.3% increase projected by economists. A day earlier, data on initial jobless claims for the week ending Aug. 10 indicated an unexpected drop.
In response, Wall Street came back to life and the S&P 500 (SP500) recorded its best weekly advance since late October 2023 on Friday.
If the August jobs report, due out Sept. 6, “looks reasonably good, we would likely lower our recession probability to 15%, where it has stood for nearly a year,” Goldman Sachs economist Jan Hatzius and his team wrote.
“We are more confident in our forecast that the FOMC will cut the funds rate by only 25 basis points at its meeting on September 17-18,” they argued. However, Goldman Sachs added that an unexpectedly gloomy jobs report on September 6 would lead to a 50 basis point cut.
